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CMA Final · Entrepreneurship and Startup · Types of New Age Business

An online platform in Pune lists independent tutors and learners, charges tutors a commission on every completed session, and owns no tutoring staff or classrooms itself. What is the main source of its network effect?

The network effect arises because each additional tutor increases the platform's value to learners, and each additional learner increases its value to tutors. This reinforcing cross-side loop is characteristic of two-sided marketplaces, and it does not depend on owned assets, falling commissions or subsidies.

  1. AHigher fixed assets owned by the platform
  2. BEach additional tutor makes the platform more valuable to learners and vice versaCorrect
  3. CLower commission rates as the platform ages
  4. DGovernment subsidies given to tutors

Explanation

In a two-sided marketplace, more tutors attract more learners, and more learners attract more tutors, creating cross-side network effects. The platform is asset-light, so fixed assets are not the source, and commission rates and subsidies are unrelated to the effect.

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